Cabinet approves 100% FDI in single-brand retail, foreign capital to shoot up

The Cabinet has given an approval to allow 100 per cent foreign direct investment (FDI)  in single-brand retail through automatic route, according to NDTV.

The move will overturn the earlier mechanism when FDI up to 49 per cent was permitted under automatic route in single-brand retail. However, beyond that limit, the government nod was required.

The decision of the Union Cabinet, which reviewed some sectors today, is an attempt to attract more overseas funds and create a more investor-friendly policy in the country.

The development might be new for single-brand offline retailers as the government opened the FDI route in the online segment around two years ago.

In November 2015, the government allowed single-brand retailers with foreign investment to sell online. 

The move created the online market for companies such as Swedish furniture retailer Ikea and fashion retailer Hennes and Mauritz AB to set up e-commerce portals in the country.

In March last year, the government announced to introduce 100 per cent FDI in online retail of goods and services under the so-called “marketplace model” through the automatic route, seeking to legitimize existing businesses of e-commerce companies operating in India.

At that time, department of industrial policy and promotion (DIPP) explained that the marketplace model is an information technology platform run by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.

DIPP had prohibited FDI in e-commerce companies that own inventories of goods and services and sell directly to consumers using online platforms.

However, it’s still unclear whether the new Cabinet approval allows 100 per cent foreign direct investment in B2C (business to consumer) e-commerce companies that own entire inventories of goods.

In 2016-2017, the country witnessed the FDI growth of 9 per cent to $43.48 billion. During April-September this fiscal year, FDI grew by 17 per cent to $25.35 billion.